What Does General Liability Insurance Cover?
General liability protects your business from third-party claims of bodily injury, property damage, and advertising injury caused by your operations. It is one of the broadest commercial policies, and one of the most commonly misunderstood.
The three core coverages
Every standard GL policy in the United States is built on the same ISO-form framework. The differences come from the limits, the endorsements, and the named exclusions, not from the core grants. The grants themselves are these three:
Bodily injury
Covers physical injury to a third party caused by your operations or the condition of your premises. Customer slips on a wet floor in your shop. A delivery employee drops a heavy box on a recipient's foot. A guest at your business is hit by a falling sign. All bodily injury claims under GL.
Property damage
Covers damage to third-party property caused by your operations. A plumber damages a customer's hardwood floor during a repair. A landscaper drops a tree branch on a parked car. A cleaner spills bleach on a customer's rug. All property damage under GL. Note: damage to property in your care, custody, or control is usually excluded unless you add the relevant endorsement.
Personal and advertising injury
Covers a specific list of non-physical harms: libel, slander, false arrest, malicious prosecution, copyright infringement in your advertising, misappropriation of advertising ideas, and a few others. Useful for defending claims that arise from your marketing or your business communications.
What GL does NOT cover
Eight standard exclusions limit the scope of GL. Each has a corresponding policy that fills the gap. The exclusions exist because the underwriting and pricing for these risks differ enough from GL that they need their own treatment.
| Exclusion | What it means | Coverage that fills the gap |
|---|---|---|
| Professional errors | Bad advice or service that causes financial harm | Errors & omissions (E&O) |
| Employee injuries | Your own staff hurt on the job | Workers compensation |
| Your own property | Building, equipment, inventory you own | Commercial property / BOP |
| Vehicles you operate | Trucks, vans, business use of personal vehicle | Commercial auto |
| Cyber incidents | Data breach, ransomware, customer data exposure | Cyber liability |
| Discrimination / harassment | Employment-practices claims | EPL insurance |
| Intentional acts | Deliberate harm or fraud by owner or staff | Generally uninsurable |
| Pollution releases | Chemical spills, environmental contamination | Pollution liability |
Common endorsements and add-ons
Most small businesses can tailor a standard GL policy with three to five endorsements at modest added cost. The most useful are:
| Endorsement | What it adds | Typical added cost |
|---|---|---|
| Hired & non-owned auto | Liability when employees drive their own car for work | $100 - $300 / yr |
| Employee benefits liability | Errors administering employee benefits | $150 - $400 / yr |
| Liquor liability | Alcohol-related third-party claims | $400 - $1,500 / yr |
| Stop-gap employer's liability | Employer liability where workers comp is monopolistic | $200 - $500 / yr |
| Care, custody, and control | Damage to third-party property in your hands | $50 - $200 / yr |
| Additional insured | Adds a client/landlord as insured under your policy | $0 - $100 per endorsement |
Policy limits explained
GL limits are written in pairs: per-occurrence first, aggregate second. The standard small-business policy is $1,000,000 / $2,000,000. Some larger contracts and leases require $2,000,000 / $4,000,000. Always read the contract limit requirement carefully and match it; falling short is the single most common cause of declined contracts.
Real-world scenarios
| Scenario | Why | Verdict |
|---|---|---|
| Customer trips on a wet floor in your shop | Bodily injury covered under GL | Covered |
| Your employee drops a tool on a client's floor | Third-party property damage | Covered |
| Competitor sues you for using their tagline | Personal & advertising injury | Covered |
| A delivery driver of yours hits a parked car | Auto-related, GL excludes | Not covered (commercial auto) |
| Client says your software advice cost them $50K | Professional negligence | Not covered (E&O) |
| Your employee injures their back on a job site | Employee injury, GL excludes | Not covered (workers comp) |
| A hacker steals customer credit card data | Cyber incident, GL excludes | Not covered (cyber) |
| You install a part that fails and causes water damage | Products-completed operations | Covered |